China's market for consumer goods down by two-thirds since 2011, with 60% of surveyed foreign brands losing market share in 2013, according to new report
July 1, 2014
– Volume growth stable but price increase slows down, store visits ebb; single-digit growth settles in; foreign brands face fierce competition
China's market for soft drinks, packaged foods, personal care and other consumer staples has slowed dramatically, by two-thirds since 2011. Foreign brands are feeling the most pressure, with 60 percent of those reviewed losing share in 2013 - this according to the "China Shopper Report, 2014," the third annual collaboration and study of the FMCG market in China by Bain & Company and Kantar Worldpanel; released today at a press conference in Beijing.
Bain and Kantar Worldpanel's survey, which tracked FMCG consumption of China's urban households covering 12 quarters up to the first quarter of 2014, projects continued single digit market growth this year, a significant drop from recent years that is driven primarily by lower growth in disposable income and annual spending per household.
The study of 40,000 Chinese households and analysis of 106 product categories covers the personal care, home care, beverage and packaged good categories that comprise 80 percent of China's non-durable consumer goods market. The study's top findings:
-- Market growth for non-durable consumer goods slowed to 4.6 percent in the first quarter of 2014, down from 10 percent growth in 2012 and 15 percent growth three years ago. The rate of decline was consistent across all cities regardless of size.
-- Volume growth was mostly stable as pricing increases declined, in large part due to fewer new higher-premium products coming to market. Growth in annual spending per household dropped from 9 percent in 2012 to 4.6 percent last year, while the number of urban household grew 2.6 percent per year, contributing to volume growth.
-- Offline shopping channels represented 97 percent of all purchases in 2013, but the nascent online sales channel is booming, and China is now the world's No. 1 digital market. Online growth for all 106 product categories was 42 percent overall.
-- Foreign brands overall lost share across the 26 categories studied in more detail. Some foreign brands did see marginal share gain, but the overall scorecard was negative, with 60 percent of foreign brands losing share.
"Our analysis shows that a key reason for fast-moving consumer goods (FMCG) growth deceleration was that the pace of premiumization slowed noticeably over the past year," said Jason Yu, China General Manager of Kantar Worldpanel. "With premiumization slowing, CPGs were unable to easily push through the price increases that helped to drive growth in previous years."
"The market implications for both foreign and domestic consumer goods companies in China are clear and direct: Growth must come from share gain, and share gain comes from penetration gain," said Bruno Lannes, a partner in Bain's Shanghai office who leads the firm's Consumer Products and Retail practice in Greater China. "Building penetration means treating each consumer as a new consumer and recruiting them at each purchase occasion."
The Bain and Kantar Worldpanel study, first of two this year, recommends investment in three brand assets to build penetration. These include:
-- Spending on critical marketing touchpoints that will anchor a brand in consumer minds, such as advertising (above-the-line) and sales promotion (below-the-line) investments.
-- Priority investment in so-called "hero" products that have greatest potential with shoppers.
-- In-store asset investments that ensure that the most important products are always available and in the right place on store shelves.
To receive a copy of the "China Shopper Report, 2014" or to schedule an interview with its authors, contact Cheryl Krauss at email@example.com or +1 646-562-7863, or Frank Pinto at firstname.lastname@example.org or +1 917-309-1065.
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About Kantar Worldpanel – high definition inspiration(TM), a CTR service in China.
We are the world leader in continuous consumer panels. Our global teams of consultants apply tailored research solutions and advanced analytics to bring you unrivalled sharpness and clarity of insight to both the big picture and the fine detail. We help our clients understand what people buy, what they use and the attitudes behind shopper and consumer behaviour.
We have over 60 years experience in helping companies shape their strategies and manage their tactical decisions; together with our partner relationships, we are present in more than 50 countries. We use the latest data collection technologies best matched to the people and the environment we are measuring. Our expertise is rooted in hard, quantitative evidence – evidence that has become the market currency for local and multinational FMCG brand and private label manufacturers, fresh food suppliers, retailers, market analysts and government organizations. For more information, please visit www.kantarworldpanel.com/cn
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